Looking for advice on co-owing a cabin with some friends

[duncanshannon]

Hi-

My wife and I own some land (9 acres in NW wisconsin) and we are talking with another family we are friends with about 'sharing' the cabin.

Does anyone have any advice and information about how you should (or should not!) go about this?

Clearly there are social/relationship topics and also some more 'management' issues.  I'd love to hear from anyone who's done this or even thought about it.   We all seem to think that we'd get along great, but also are realistic and know that it will require some careful planning and 'structure' to help ensure the long term success of the cabin and family relationships.

Some starter questions...

1) how to you 'share' owning the land and the building?  Form an LLC and both own it 50 / 50?  Put another set of names on the deed?

2) how do you manage maintenance costs and 'changes' to the cabin?  Shared account somewhere with some balance in it? 

3) how do you manage sharing the time?  Holidays?

4) what do you do when someone needs/wants to now own part of it anymore?

That is plenty to get started.... 

[MountainDon]

Sharing like that makes me nervous. I love my wife; I'll share with her but I'm not so sure about anyone else I know or have known to this point. Maybe that's just me being an old fart.          But then I wasn't always an old fart      Maybe it's just me. Maybe I failed sharing in preschool? 

I look at how many couples get divorced and I wonder if the odds would be better or worse than that?

[Bob S.]

I think you will wind up with 1/2 ownership of a cabin that is co-owed by someone that you are no longer friends with.

[duncanshannon]

Thanks for the oponions guys.  I'm optimistic that we should be able to work something out, granted not 100% yet. We are in the talking about it phase.

Found this googling...

http://www.realtor.com/home-finance/real-estate/buyers/pros-and-cons-of-co-buying-a-home.aspx

This one has some good real-life examples in it:  (lots of don't do it, also some 'we've done it and it works just fine')

http://www.ahamembership.com/press/press_080902.cfm

So far, all parties want to be very specific and clear up front - with acknowledging that there is risk and wanting to put a plan in place to minimize and manage the risk.

[ColchesterCabin]

If you proceed probably wouldn't have to go so far as the LLC as that would have not only costs involved but potential tax implications. IF and it is a big if you proceed sub divide just enough land for the camp to be on, don't forfiet you previous investment of your 9 acres. And plan a buyout phase in case. Friends now might always be the case.

[rick91351]

Two places you never do partnerships:  business and real estate.  I would never do such a venture.  I am sort of like MD flunked sharing from one year old until now 60 of them.  Kids and grand kids exempt of course.  I think I was traumatized at share day at school.....

[markert2523]

I am in the final planning stages of a cabin that will be shared by my family and another family we have known for years.  Our situation is a little different as our cabin will be built at a remote club that has a large old hunting lodge and several other cabins.  Currently we live in a communal membership with several other families that use the lodge on a first come-first served basis.  The people who own cabins don't own the land, but rather have a long term lease agreement with the club.  Most cabins there have been passed down over many decades.

That is where I think my situation differs from yours---the land ownership.  In your case, co-owning the cabin/land presents a whole extra layer of complication--deeds, taxes, etc.  Also, you already own the land.  Anyone that moves onto it will feel like that second wife that moves into her new husbands house that he had shared with his previous wife.

In your situation, I just wouldn't do it.

Just my thoughts

[Don_P]

I'd be much more inclined to sell them half the land and use that towards building your place. You can certainly invite them to use your place while they get their place going but it makes it much easier to draw lines when needed.
We looked into a communal land ownership/ private home community years ago. One good thing is they wanted us to come visit during one of their business meeting periods. I never knew a pinto could catch third until we left that bunch .

[hhbartlett]

I'd be much more inclined to sell them half the land and use that towards building your place. You can certainly invite them to use your place while they get their place going but it makes it much easier to draw lines when needed.
We looked into a communal land ownership/ private home community years ago. One good thing is they wanted us to come visit during one of their business meeting periods. I never knew a pinto could catch third until we left that bunch .

I'd make it even simpler. Lease them part of your land, let them build on it. Retain sole ownership of the whole property. That's done around here a fair bit. It's up to you how close or far they can build for privacy. The lease would be an annual renewable lease, something simple. That would be the cleanest, cheapest way of doing it.

No way I'd ever share an actual cabin with another family. Let friends use it, yes, maybe even rent it out for a couple of weeks, bu not share ownership. Just asking for problems that way.

[glenn kangiser]

Friend of mine bought property with a friend.  20 years later they are at war and have been for about 15 - maybe more.  The building inspector said he wished they would quit turning each other in because he didn't want to go out to enforce code on them.

Business partnership with relatives - no - didn't work over 6 months for me - not even that long.

[Alan Gage]

Maybe it could work for you guys but I'd hate that situation myself. Who decides what gets built, where, and how? Who does the building? If you do all the building do you get paid for doing their half? Maybe they're in charge of getting some things built and you're in charge of others. What if one of you falls behind? What if they decide to hire some of their work done and hire cousin Jimmy who's a total hack? What if you want to cut costs and they want to spend more? Or vice-versa?

Building your own house/cabin is a very personal thing. I for one want it just how I want it and don't want anyone else telling me I should do this or that. I see very few benefits and many downsides of partnering up with someone. Actually the only benefit I can see is cutting costs up front, which would likely turn into much more expense later on should either party want to opt out as then it's either buy them out or sell the whole thing and split the money.

Is there anyway to protect it should one party get into big financial trouble (i.e. medical bills)?

Alan

[duncanshannon]

Hi folks-

Thanks for the thoughts.  Deff. Not an encouraging thread

I would love to hear people's specific areas of concern or hear more about what they have seen go wrong.  We are going in eyes wide open and hope to try and anticipate problem areas and try to make decisions or even a set of principles to help set some guidelines to prevent problems.

Can it be done?

[ColchesterCabin]

Can it be done? YES but I guess what everyone is saying is just protect yourself as it may seem a great relationship now but down the road who knows. We all wish you luck and happiness but we have all been there in some form or another. The areas of concern for me would be:

1.) Land ownership (9 acres or in part)?
2.) Taxes/ deeding?
3.) Down the road usage agreements (who gets what weekend)?
4.) Buyout agreement (who retains the rights to buy the other out and at what price)?

These just name a few, at the end of the day if that is what you decide to do where as it is your land don't do 50/50 always retain majority even as little as 51/49.

[MikeOnBike]

I 'co-own' our 80 acres with my  mother and brother.   Mom legally owns the property and my  brother and I are doing all the work as our equity.  My brother and I are close and the only siblings so we will jointly inherit the property.  I have no concerns about that part.  As close as we are I have no interest in sharing a cabin with my mother, brother, his kids, my kids, the grandkids, etc. 

When I go to the mtn. I want some space.  I don't mind connecting up for a meal or other activities but I want to take a nap when I'm tired and I don't want to babysit someone else's kids.  Maybe I'm a grumpy old fart but my biggest concern with your scenario is contention for the single cabin.  We are eventually going to have three places.  They won't be as fancy as one big place but I don't mind.

You may stay friends longer if you each have your own place even if you share the 9 acres.  I wouldn't build closer than 100 yards from each other.  Our places are going to be about 300yds from each other.  It's really not too far to walk and it feels like we really have our own space.

[ColchesterCabin]

Now Mike that sounds like an awesome plan.

[Ndrmyr]

Just like good fences make good neighbors and never loan money to friends, this is a risky venture, that, if it succeeds will be enjoyable, if it fails will be a relationship destroying financial disaster.  If you do this as couples, you know have 4 co-owners, just one of whom can have a change of heart and crash this arrangement.  Assume for a moment, your friends get a divorce.  The ownership will still exist, but now the two of them can't stand each other.  Now one or both of them re-marries.  Now do you have 3 couples as co-owners? 25%/25%/12.5%/12.5%/12.5%/12.5%?  Are you and your wife now expected to carry the brunt of mainenance and repairs since you have a greater percentage of ownership than the others?  Your untilization increases by 50%, perhaps more.  What about in 20 years.  Before you had perhaps 8 people total, now 12, in 20 years 24, in another 20 perhaps 50 or more.
I have some experience in this type of thing.  I co-own a former Rail-Road sand and gravel pit with 14 other owners.  All 15 original owners worked for the Rail Road and some degree of common ground.  Now, nearly 40 years later, many transfers of ownership and inheritances, we are deeply fragmented.  Meetings are divisive and argumentative.  Many contribute nothing, only a few do all the work. Generally speaking, those who do nothing complain the loudest. 
Look, it's just like marriage, we can NOT guarantee someones future behavior.  None of us can truly guarantee our spouses future actions.  We may believe our marriages and friendships will endure, and perhaps, if it were just up to us, they would.  You can not accurately predict where your own marriage will be in 20 years, let alone your friends.  If you insist, I wish you good luck, and you will need it.  Trust me, your friends will not stay in their marriage just to share the cabin.

[alex trent]

Figuring out how you can each own your own place is worth the effort...big time.

Even if it does not start a war, will be more strains than benefits.

[PorkChopsMmm]

We bought our 20 acres with a close couple friend of ours. I formed an LLC and myself and the other husband are the proprietors. The other couple wanted to park some money in some place other than the stock market and we wanted to build a small cabin for vacation use. We had buyout figured out and everything beforehand and it has worked our quite well.

So far, so good, but there are a few things I would do differently. Our vacation cabin turned into a full fledged house that we are moving into at the end of the month, so things have changed.

- If you ever make the land/cabin your full time residence, you don't want it owned by an LLC. We can't apply for the 'homestead exemption' here because of it being owned by an LLC -- it doesn't matter that it has a single family living on the land. The exemption would save us 50% of our taxes per year.
- We did not divvy up the land -- we just own everything 50-50. In hindsight I would have sectioned up the land first. There are some desireable and less desireable spots. We build on the most desireable spot -- with full permission from my friend -- but if we wanted to divvy it up now it would be hard.
- We want to buy the land outright, or section off a smaller piece for the other family, and pay the difference. We would need to be in full agreement with this.

It can work but I think in your situation it would be hard to work well, especially since you already own the land. Then again, who knows. They could help pay for 50% of the cabin and then never show up.

[old_guy]

We are in a similar situation on 180 acres with a cabin for hunting.  My 2 brothers, a cousin, and a couple of aquaintences each owning shares.  It is ok now, as our goals and usage are similar.  We all recognize there will be issues in the future as our families usage wants evolve.

A relatively big issue right now is that different users have very different opinions on what is clean.  Some of us use the first few hours of a visit cleaning up the place, and a few others apparently use none.

[JRR]

Just look around in your area for examples of co-owned properties that have worked out well among friends over the years.  You know, those communal experiments that seem to last forever ....

(You're right ... there are none!)

[duncanshannon]

hmmm. keep it coming folks.

One thing to point out... we cant divide our land. It would be one cabin on the 9 acres.

It seems that the exit strategy / planning is where you need to nail it. So that... if something happens, you can try and unwind the deal.

It would seem that, if nothing else, what do you do when you all pass away and your kids (we have 2 boys, each family) that would inherit it. Now 4 parties share it? Then 8 or 16 the next generation?

Hmm.

[duncanshannon]

Another 2 references on the web..

http://www.lakeplace.com/cabinlife/The-Shared-Cabin

http://www.felhaber.com/events/articles/100209-FamilyCabin.asp

[John_M]

I always try and go by the saying....prepare for the worst and hope for the best!

Life is incredibly unfair at times.....what happens with divorce, death, disagreements, is all unknown at this point.

I currently own my 36 acres with my uncle.  He has a mobile home on it and I am building a cabin.  The land is paid off and I pay 65% of the taxes and he pays 35% (my cabin increased the assesed value).  We are like brothers and have really not had any issues....until now.

He is currently having marital problems and will likely be getting divorced.  We are not sure what this means right now.  They are trying to sort things out amicably, but sooner or later the you know what is going to hit the fan and things will likely get bitter!!  We never really prepared for this as the land is in all four of our names (us and our wives).

It is nice to be able to split the cost of all of our improvements and maintenance of the property but I can;t imagine how things would be if we split a cabin.

I know financially it helps out, but sometimes the headaches aren't worth it!!!

Here is an idea...you buy the land and build the cabin the way you want it and they can rent it from you whenever it is available??  Things get weird....you both can separate with no issues at all?

[John Raabe]

Well, I don't think this idea is as unworkable as some are suggesting. After all, a two-party ownership is far less complicated than a co-housing development where land, buildings, a common hall, gardens, etc are all designed, built and shared by the community's families.

I've been involved with a couple of co-housing projects and the endless meetings can be daunting. That said, there are several successful examples that have been done on my island and scores of other places in the Washington Oregon area. Here is an incomplete national directory -  http://www.cohousing.org/directory

We have a couple who have been close friends for many years. We wouldn't want the complexity of co-housing, but have sketched out ideas for a shared condo complex that includes a couple of smaller houses linked together on either end of a large sunroom/great room that both units would share. One of the advantages of this is there could be one shared large garage, one workshop, one lawn mower, etc.  A condo model could work for this - you hold title to your unit plus the ground under it and then an undivided common ownership of the remaining land and shared facilities. You'd want to check if the land you are considering would allow such use.

Finally, here is an interesting place I found with a search on the term "cohousing cabin" - http://www.calcoho.org/openings/past-openings/soquel-hills-rent.html

[UK4X4]

Keep the property in your name

Build together a dog trot type design where each person has their own space and usage

Work out a split deal for tax's etc and the split or buyoff down the road based on the build cost.........

Enjoy together- if he leaves the agreement, fine fill in the open section and enjoy your larger cabin

get a lawyer to draft the agreement and only to one person not a couple- keep the deal a simple as possible and clear to both parties